CEO Andy Jassy’s answer on Amazon’s cloud business cost shareholders nearly $100 billion
Amazon CEO Andy Jassy was seemingly wrong-footed during the first round of questions he faced on Amazon’s conference call yesterday, and shareholders paid dearly for it.
JPMorgan analyst Doug Anmuth asked Jassy a two-parter: how are suppliers, Amazon, and consumers digesting tariffs? And, why is Amazon Web Services growing slower than Google’s or Microsoft’s respective cloud divisions?
If you can read this entire quote, and you’re still not sure why Google Cloud is growing faster than AWS, you have reached the same conclusion as the market.
Jassy’s answer (emphasis ours):
“On the question on AWS, yeah, the first thing I'd say is it's — as you said, Doug, in your question, year-over-year percentages and growth rates are always a function of the base in which you operate. And we have a meaningfully larger business in the AWS segment than others. I think the second player is about 65% of the size of AWS. And when we look at the results over the last number of quarters there are sometimes we're as far as we can tell, we're growing faster than others and sometimes others are growing faster than us. But it's still like if you look at the second place player, you're talking about, it's a pretty — it's still a pretty significant segment, market segment leadership position that we have.
And regardless, these are all really just moments in time. The last week is a moment-in-time too where the reality of what really matters is what customers' experiences are in operating on these platforms. And if you look at what matters to customers, what they care a lot about what the operational performance is, what the availability is, what the durability is, what the latency and throughput is of the various services. And I think we have a pretty significant advantage in that area.
They care a lot about security. If you have data that matters and for most companies they're putting data that they really care about in the cloud. The security and the privacy of that data matters a lot and there are very different results in security in AWS than you'll see in other players. And yeah, you could just — you just look at what's happened in the last couple of months, you can just see kind of ventures at some of these players almost every month. So very big difference, I think in security.
And then I think a really significant difference in functionality where not just in the core infrastructure do we have a lot more functionality in our services, but I think if you look at our end- to-end offering in AWS, in AI, it's from the bottom of stack all the way to the top, it's pretty different. So you know, I feel good about the inputs and the services that we're offering to customers across AI as well as non-AI. And we could — we have more demand than we have capacity right now. So we could be doing more revenue and helping customers more and we're working very hard on changing that outcome and how much capacity we have. But it's still — like look at the business, it's a $123 billion annual revenue run rate business and it's still early. I mean, how often do you have an opportunity that's a $123 billion of annual revenue run rate where you say it's still early? It's a very unusual opportunity that we're very bullish about.”
When you’re explaining, you’re losing. Especially when your peers can just point to the scoreboard.
I’m reminded of the moment in “Blow” when Johnny Depp’s character waxes philosophical on the nature of his alleged crime and the judicial system while offering his plea. The judge’s retort: “Unfortunately for you, the line you crossed was real and the plants you brought with you were illegal, so your bail is $20,000.”
Because unfortunately for Jassy, this “moment in time” is “earnings season” and the numbers and answers he brought with him were underwhelming, so his punishment is a near $100 billion loss in market cap from that answer alone, as shares slumped roughly 4% amid those comments.
“On the question on AWS, yeah, the first thing I'd say is it's — as you said, Doug, in your question, year-over-year percentages and growth rates are always a function of the base in which you operate. And we have a meaningfully larger business in the AWS segment than others. I think the second player is about 65% of the size of AWS. And when we look at the results over the last number of quarters there are sometimes we're as far as we can tell, we're growing faster than others and sometimes others are growing faster than us. But it's still like if you look at the second place player, you're talking about, it's a pretty — it's still a pretty significant segment, market segment leadership position that we have.
And regardless, these are all really just moments in time. The last week is a moment-in-time too where the reality of what really matters is what customers' experiences are in operating on these platforms. And if you look at what matters to customers, what they care a lot about what the operational performance is, what the availability is, what the durability is, what the latency and throughput is of the various services. And I think we have a pretty significant advantage in that area.
They care a lot about security. If you have data that matters and for most companies they're putting data that they really care about in the cloud. The security and the privacy of that data matters a lot and there are very different results in security in AWS than you'll see in other players. And yeah, you could just — you just look at what's happened in the last couple of months, you can just see kind of ventures at some of these players almost every month. So very big difference, I think in security.
And then I think a really significant difference in functionality where not just in the core infrastructure do we have a lot more functionality in our services, but I think if you look at our end- to-end offering in AWS, in AI, it's from the bottom of stack all the way to the top, it's pretty different. So you know, I feel good about the inputs and the services that we're offering to customers across AI as well as non-AI. And we could — we have more demand than we have capacity right now. So we could be doing more revenue and helping customers more and we're working very hard on changing that outcome and how much capacity we have. But it's still — like look at the business, it's a $123 billion annual revenue run rate business and it's still early. I mean, how often do you have an opportunity that's a $123 billion of annual revenue run rate where you say it's still early? It's a very unusual opportunity that we're very bullish about.”
When you’re explaining, you’re losing. Especially when your peers can just point to the scoreboard.
I’m reminded of the moment in “Blow” when Johnny Depp’s character waxes philosophical on the nature of his alleged crime and the judicial system while offering his plea. The judge’s retort: “Unfortunately for you, the line you crossed was real and the plants you brought with you were illegal, so your bail is $20,000.”
Because unfortunately for Jassy, this “moment in time” is “earnings season” and the numbers and answers he brought with him were underwhelming, so his punishment is a near $100 billion loss in market cap from that answer alone, as shares slumped roughly 4% amid those comments.
